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Florida Audit Reports


Issue Date: August 14, 2007
Audit Report No.: 2007-AT-1010
File Size: 3.24MB

Title: The Cathedral Foundation of Jacksonville, FL, Used More Than $2.6 Million in Project Funds for Questioned Costs, Jacksonville, FL

We audited the Cathedral Foundation of Jacksonville, Inc. (Foundation), concerning its involvement as owner and/or manager of four elderly multifamily housing projects (projects) located in Jacksonville, Florida. We conducted the audit based on a request from the Jacksonville Multifamily Housing Hub, U.S. Department of Housing and Urban Development (HUD), Jacksonville, Florida. Our audit objective was to determine whether the Foundation operated the four projects in accordance with HUD's regulatory agreements and other applicable laws, regulations, and requirements.

The Foundation used more than $2.65 million in project funds for questioned costs while the projects had no surplus cash and without required HUD approval. The questioned amount included $1.35 million, which the Foundation repaid itself without HUD approval for project advances and $1.30 million for questioned costs for salaries, fringe benefits, janitorial services, retirement plan, parking fees, and other costs. The questioned costs violated federal statutes, regulations, contracts, and other HUD requirements. The Foundation and subsidized project owners also collected $93,677 in prohibited parking fees from tenants. The prohibited parking fees placed an unjustified financial burden on the tenants. The violations occurred because the Foundation and project owners did not follow HUD's and other requirements.

We recommend that the director of HUD's Jacksonville Multifamily Housing Hub require the Foundation and project owners to deposit to the project's residual receipt accounts more than $2.5 million for ineligible, unreasonable, or unnecessary costs and repay any portion of the $147,277 in unsupported costs that it cannot document as reasonable and necessary costs for the projects. We further recommend that the director require the Foundation and the owners of the projects to reimburse $93,677 to tenants who paid prohibited parking fees. We also recommend that the director of the Departmental Enforcement Center, in coordination with the director of the Multifamily Division, Jacksonville Hub, take appropriate administrative action against the Foundation and project owners for not complying with requirements.


Issue Date: September 15, 2006
Audit Report No.: 2006-AT-1020
File Size: 120kb

Title: The Jacksonville, Florida Housing Authority�s Section 8 Units Met HUD Housing Quality Standards

We conducted an audit survey of the Jacksonville Housing Authority's (Authority) Section 8 Housing Choice Voucher program as part of the U.S. Department of Housing and Urban Development (HUD), Office of the Inspector General's (OIG) annual audit plan. We selected the Authority for review based on a Section 8 risk assessment we conducted. Our objectives were to determine whether the Authority made Section 8 subsidy payments only for units that met housing quality standards and whether the program warranted a full audit.

Our inspection of 18 Section 8 units found that five did not meet minimum housing quality standards, two of which were in material noncompliance. The low error rate did not warrant proceeding from the survey to a full audit of the program.

The Authority agreed with our inspection results. It notified the owners of the inspection results and requested that they correct the violations. The Authority has also agreed to re-inspect the units to ensure the violations have been corrected. Thus, the report contains no finding, and no further action is necessary.


Issue Date: July 28, 2006
Audit Report No.: 2006-1018
File Size: 93.26

Title: Taylor, Bean and Whitaker, Inc., Ocala, Florida, Met Temporary Interest Rate Buydown Requirements

We audited Taylor, Bean and Whitaker, Inc. (auditee), in Ocala, Florida, because of the number of temporary interest rate buydown (buydown) loans it underwrote that went into default. Our objective was to determine whether the auditee followed U.S. Department of Housing and Urban Development (HUD) regulations, procedures, and instructions when it assessed borrowers' eligibility for loans it underwrote that involved buydowns.

We identified no instances in which borrowers did not qualify for the buydowns the auditee approved. In most instances, the auditee did not document its assessment of the borrowers' eligibility for the buydowns. However, lenders are no longer permitted to qualify borrowers using buydown mortgage payment amounts. Accordingly, there is no need for action to address the auditee's failure to properly document its assessment of borrowers' eligibility for the buydowns. This report contains no finding.


Issue Date: July 26, 2006
Audit Report No.: 2006-AT-1014
File Size: 214.67

Title: The State of Florida Lacked Adequate Procedures to Prevent Possible Duplicate Disaster Recovery Benefits to Recipients

We audited the 2004 Community Development Block Grant disaster recovery funds provided to the State of Florida (State). We selected this grant for review based on risk factors associated with fraud, waste and abuse. Our audit objectives were to determine whether the State (1) awarded and disbursed disaster recovery funds in accordance with HUD requirements and (2) implemented adequate procedures for monitoring the projects financed by the disaster recovery funds.

The State awarded and disbursed the 2004 Community Development Block Grant disaster recovery funds in accordance with HUD requirements. However, program files lacked evidence that the State verified whether recipients used disaster recovery funds for activities reimbursed by the Federal Emergency Management Agency, Small Business Administration, or other sources. This occurred because the State did not have adequate procedures to prevent possible duplicate disaster recovery payments to recipients. As a result, the opportunity existed for a recipient to receive funding for the same activity from several sources.

We recommend that HUD require the State to develop and implement procedures to ensure that Community Development Block Grant disaster recovery funds will not be used for activities reimbursed by the Federal Emergency Management Agency, Small Business Administration, or any other program or source and maintain supporting documentation in its files.


Issue Date: June 28, 2006
Audit Report No.: 2006-AT-1012
File Size: 1.33MB

Title: The Miami Dade Housing Agency, Miami, Florida, Paid Housing Choice Voucher Program Funds for Some Overhoused Tenants

We completed an audit of the Miami Dade Housing Agency's (Agency) Section 8 Housing Choice Voucher program. Our audit objective was to determine whether it paid excess subsidies for overhoused tenants.

The Agency overhoused 17 tenants and unnecessarily paid $61,862 in excess subsidies on behalf of 13 of these tenants. In addition, the Agency has 228 tenants who could be overhoused with the potential to incur excess subsidy payments. The Agency does not have adequate procedures to ensure that tenants receive the proper voucher size. By improving its procedures, the Agency could avoid future losses of $81,828, which would allow it to provide vouchers to additional tenants.

Our recommendations include requiring the Agency to (1) submit a corrective action plan to correct the 17 overhoused tenant vouchers; (2) reimburse its program $61,862 in non-federal funds; (3) submit a time schedule to review the additional 228 tenants for overhousing, a corrective action plan to correct any overhoused tenant vouchers, and reimburse its program in non-federal funds; and (4) develop and implement procedures to ensure that tenants receive the proper voucher size to avoid future losses of $81,828.


Issue Date: May 31, 2006
Audit Report No.: 2006-AT-1010
File Size: 1.77MB

Title: The Orlando Housing Authority Did Not Ensure That All Section 8 Units Met Housing Quality Standards and Paid Excessive Subsidies for Some Units

We audited the Orlando FL Housing Authority's (Authority) Section 8 Housing Choice Voucher program. Our audit objective was to determine whether the Authority made Section 8 subsidy payments only for units that met housing quality standards and whether subsidy payments were limited to the amount allowed for the unit size authorized by each family's composition.

Our inspection of a statistical sample of 67 Section 8 units found that 20 did not meet standards of which 8 units were in material noncompliance. This condition occurred because the Authority's inspectors did not identify the unit deficiencies during their inspections or identified the conditions but did not report the units as being in noncompliance. As a result, the Authority paid $31,474 in ineligible subsidies for the 8 units, and we estimate the Authority will pay housing assistance payments of more than $1.14 million for units in material noncompliance with housing quality standards. In addition, the Authority paid $10,393 in excess housing assistance payments for 5 of 22 tenants housed in units larger than justified by the families' composition. The improper voucher size occurred because the Authority did not always follow requirements to ensure that tenants are only issued Section 8 vouchers for the unit size authorized by their family composition.

We recommend that the director of the Office of Public Housing require the Authority to abate Section 8 subsidies or terminate HAP contracts on all units that do not meet standards if the violations detected by our inspections are not corrected in a timely manner. The director should also require the Authority to improve its controls over the inspection process to ensure that inspectors properly identify and report all housing quality standards violations in the units they inspect to prevent more than $1.14 million from being spent on units with material housing quality standards violations. We further recommend that the director require the Authority to repay $31,474 from nonfederal funds for ineligible housing assistance payments it made for the eight units with material violations.

We also recommend that the director of the Office of Public Housing require the Authority to reimburse its program from nonfederal funds $10,393 for excess housing assistance payments for five overhoused tenants plus any additional amount paid until corrective action is taken. The director should also require the Authority to establish controls to ensure initial determination of the correct voucher size and to adjust tenant vouchers in a timely manner to reflect reported changes in family composition. The director should require the Authority to issue the correct size voucher to overhoused tenants and ensure their subsidy amounts are properly calculated.


ssue Date: January 12, 2006
Audit Report No.: 2006-AT-1003
File Size: 2273KB

Title: Certified Home Loans of Florida, Miami, Florida Did Not Always Comply with Federal Housing Administration Requirements

We audited Certified Home Loans of Florida (Certified) in Miami, FL. Certified is a non-supervised direct endorsement lender approved by the U.S. Department of Housing and Urban Development (HUD) to originate and underwrite Federal Housing Administration-insured single-family mortgages. We selected Certified for review because of risk factors associated with defaulted loans.

The audit objectives were to determine whether Certified: (1) complied with HUD regulations, procedures, and instructions in the origination and underwriting of Federal Housing Administration-insured single-family mortgages, and (2) implemented its quality control plan as required. Certified did not follow HUD requirements when underwriting 14 Federal Housing Administration-insured loans totaling $1,885,734. Fourteen of the 17 loans we reviewed had problems. These loans contained deficiencies that affected the insurability of the loans. Certified approved the loans based on inaccurate employment, income, and gift information and other deficiencies. This occurred because Certified did not exercise due care in originating and underwriting loans, primarily by not clarifying inconsistencies in the loan files or adequately following up to verify borrower income and employment histories.

Certified did not fully implement its quality control plan. Certified did not conduct the required number of quality control reviews, including early defaulted loans and rejected loan applications, nor ensure that quality control reviews were performed within 90 days of closing. Certified's quality control plan was also incomplete, as it did not include all required elements as prescribed by HUD. We attribute these deficiencies to Certified's disregard of HUD requirements and instructions and reliance on an independent contractor to fulfill its responsibilities. As a result, HUD has no assurance of the accuracy, validity, and completeness of Certified's loan origination and underwriting operations.

We recommend that the Assistant Secretary for Housing-Federal Housing Commissioner require Certified to: (1) indemnify HUD against future losses on four loans totaling $660,699, and (2) reimburse HUD for a loss, if applicable, of $728,479 for claims paid for five loans. We further recommend that HUD take appropriate measures to ensure that Certified conducts required quality control reviews and the written quality control plan complies with HUD requirements. Finally, we recommend that HUD take administrative action, as appropriate, up to and including civil monetary penalties.


Issue Date: December 21, 2005
Audit Report No.:2006-AT-1001
File Size: 884.21KB

Title: The Miami Dade Housing Agency, Miami, Florida
Did Not Ensure Section 8-Assisted Units Met Housing Quality Standards

We completed an audit of the Miami Dade Housing Agency's (Agency) Section 8 Housing Choice Voucher program. Our audit objective was to determine whether Section 8-assisted units met housing quality standards in accordance with HUD requirements.

Our statistical sample of 120 Section 8 units found that 117 units did not meet minimum housing quality standards. Of the 117 units, 38 had significant housing quality standards violations. Projecting the results of the statistical sample to the population indicates at least 12,387 of the Agency's 13,220 units did not meet minimum housing quality standards. Further, 3,265 units had significant housing quality standards violations. This occurred because Agency management did not place sufficient emphasis on housing quality standards requirements and did not implement adequate internal controls. As a result, tenants lived in units that were not decent, safe, and sanitary, and HUD made housing assistance payments for units that did not meet standards.

Our recommendations include requiring the Agency to inspect all of the 117 Section 8 housing choice voucher-assisted units to verify that corrective actions were taken by the landlord and if not, to abate the rents or terminate the tenants' vouchers. The Agency should also develop and implement an internal control plan and incorporate it into the Agency's Section 8 administrative plan to ensure units meet housing quality standards and inspections meet HUD requirements to prevent an estimated $25.9 million from being spent on units with significant violations. Further, HUD should reduce or offset $7,300 of the Agency's administrative fees for the 38 units with significant housing quality standards violations.


Issue Date: September 29, 2005
Audit Memorandum No.: 2005-AT-1804
File Size: 44.07KB

Title: American Financial Network, Boca Raton, Florida

We performed an audit survey of American Financial Network (American Financial), operating from its home office in Boca Raton, Florida. American Financial is a nonsupervised direct endorsement lender approved by the United States Department of Housing and Urban Development (HUD) to originate Federal Housing Administration-insured single-family mortgages. We selected American Financial due to its high default rate. American Financial's primary underwriter had a 314 percent compare ratio and a 15.26 percent default rate for loans with beginning amortization dates between September 1, 2003, and August 31, 2005. We learned that the Quality Assurance Division conducted a review of one of American Financial's primary loan correspondents. It is still performing analysis and verification work on the loans selected for review. Therefore, we decided to suspend further work to avoid duplication.


Issue Date: March 25, 2005
Audit Report No.: 2005-AT-1008
File Size: 1.14MB

Title: Trust America Mortgage, Inc. Non-Supervised Direct Endorsement Lender Cape Coral, Florida

We audited Trust America Mortgage, Inc. (Trust America) in Cape Coral, FL. Trust America is a non-supervised direct endorsement lender approved to originate FHA single-family mortgages. We selected Trust America for review because of risk factors associated with defaulted loans. Our objectives were to determine whether Trust America complied with HUD regulations, procedures, and instructions in the origination and underwriting of Federal Housing Administration-insured single-family mortgages, and implemented its quality control plan as required.

Trust America did not follow HUD requirements when originating and approving 16 Federal Housing Administration-insured loans totaling $1,949,079. Sixteen of the seventeen loans we reviewed had problems. All 16 loans contained underwriting deficiencies that, taken as a whole, should have led a prudent lender to not approve the loan. Trust America approved the loans based on inadequate asset and debt verification and other deficiencies. The deficiencies occurred because Trust America failed to exercise due care in originating and underwriting loans, primarily by not clarifying inconsistencies in the loan files. These deficiencies increased HUD's risk to the Federal Housing Administration insurance fund.

Trust America did not fully implement its quality control plan. Trust America did not conduct the required number of quality control reviews, including reviews of early defaulted loans and rejected loan applications. Trust America's quality control plan was also incomplete, as it did not include all required elements as prescribed by HUD. We attribute these deficiencies to Trust America's disregard of HUD requirements and instructions and reliance on an independent contractor to fulfill its responsibilities. As a result, HUD has limited assurance of the accuracy, validity, and completeness of Trust America's loan origination and underwriting operations.

We recommend that the Assistant Secretary for Housing-Federal Housing Commissioner require Trust America to indemnify HUD against future losses on eight loans totaling $977,709, reimburse HUD for a loss already incurred of $17,502 on one property, and reimburse HUD for a loss, if applicable, on another property for which HUD paid a claim of $113,002. We further recommend that HUD take appropriate measures to ensure Trust America conducts required quality control reviews and the written quality control plan complies with HUD requirements. Finally, we recommend that HUD take administrative action, as appropriate, up to and including civil monetary penalties.


Issue Date: March 15, 2005
Audit Report No.: 2005-AT-1007
File Size: 1.14MB

Title: Interstate Financial Mortgage Group Corporation Non-Supervised Direct Endorsement Lender Miami, Florida

We audited Interstate Financial Mortgage Group Corporation (Interstate) of Miami, FL, a non-supervised direct endorsement lender approved to originate FHA single-family mortgages. We selected Interstate for review because of risk factors associated with defaulted loans. Our objectives were to determine whether Interstate complied with HUD regulations, procedures, and instructions in the origination and underwriting of FHA-insured single-family mortgages, and implemented its quality control plan as required.

Interstate did not follow HUD requirements when originating and approving 15 FHA-insured loans totaling $1,599,281. Fifteen of the 18 loans we reviewed had problems. Interstate approved the loans based on inaccurate employment, income and gift documentation, and other deficiencies. This occurred because Interstate did not exercise due care in originating and underwriting loans, primarily by not clarifying inconsistencies in the loan files or adequately following up to verify borrower income and employment histories. Interstate also improperly allowed independent loan officers to originate loans and maintained no supporting documentation to ensure HUD that interest rates, loan discount points, and other fees were appropriately charged. These deficiencies increased HUD's risk to the Federal Housing Administration insurance fund.

Interstate did not fully implement its quality control plan. Interstate did not conduct the required number of quality control reviews, including early defaulted loans and rejected loan applications, nor ensure that immediate corrective action was taken when deficiencies were identified by its contractor. Interstate's quality control plan was also incomplete, as it did not include all required elements. We attribute these deficiencies to Interstate's disregard of HUD requirements and instructions. As a result, HUD has no assurance of the accuracy, validity, and completeness of Interstate's loan origination and underwriting operations.

We recommend that the Assistant Secretary for Housing-Federal Housing Commissioner require Interstate to indemnify HUD against future losses on 10 loans totaling $1,057,905, reimburse HUD for a loss already incurred of $36,951 on one property, and reimburse HUD for a loss, if applicable, on another property for which HUD paid a claim of $110,866. We recommend that HUD require Interstate to stop using independent loan officers to originate FHA loans and maintain documentation to justify interest rates, loan discount points, or other fees charged. We further recommend that HUD take appropriate measures to ensure that Interstate conducts required quality control reviews, corrective action is taken and documented for all reported deficiencies, and the written quality control plan complies with HUD requirements. Finally, we recommend that HUD take administrative action, as appropriate, up to and including civil monetary penalties.


Issue Date: August 19, 2004
Audit Report No. 2004-AT-1014
File Size: 346.5KB

Title: West Palm Beach Housing Authority West Palm Beach, Florida

The Authority improperly encumbered low-income housing properties as collateral for a $3 million line of credit. In addition, the Authority used $150,000 in capital funds to defray expenses associated with housing development activities without HUD approval. Therefore, low-income housing assets were unnecessarily put at risk, and capital funds were used in violation of HUD requirements. We believe these actions occurred because the Authority had not established adequate controls to monitor transactions and ensure that they met with HUD requirements.


Issue Date: August 19, 2004
Audit Report No. 2004-AT-1013
File Size: 1.76MB

Title: Housing Authority of the City of Lakeland, Lakeland, Florida

We found the Authority paid at least $296,140 for ineligible expenses that were not authorized under its Housing Opportunities for People Everywhere (HOPE VI) Grant. This included $270,437 for legal fees and $25,703 for financial consultant fees. Also, the Authority failed to obtain timely repayment of $990,169 it advanced to the lead developer, The Communities Group (TCG). As of December 31, 2003, TCG still owed the Authority $704,542, which is at risk of nonpayment. On January 23, 2004, the Authority issued a Notice of Default to TCG for failure to adequately perform. The Authority assumed the role of lead developer for the remaining phases. However, the Authority has not demonstrated the capacity to serve as lead developer. Thus, we question whether the Authority has the capacity to complete its HOPE VI Revitalization Plan. Also, the Authority and TCG are currently involved in legal disputes that could affect completion of the remaining phases. We are also concerned as to whether sufficient funds remain to complete all the remaining phases and whether they can be completed timely. Accordingly, successful completion of the remaining phases of the Revitalization Plan and the remaining $7.6 million of Grant funds are at risk.

These actions occurred because the Authority did not have adequate controls to ensure Grant funds were spent only for eligible activities, the Authority did not timely enforce the terms of its Pre-Development Agreement with TCG, and because TCG failed to fulfill its responsibilities as specified in the Master Project Development Agreement, Pre?Development Agreement, and Lead Developer Agreement.


Issue Date: June 17, 2004
Audit Report No.: 2004-AT-1010
File Size: 1.98MB

Title: First Community Mortgage, Inc., Non-Supervised Loan Correspondent, Ft Myers, FL

The officer/owners of First Community Mortgage, Inc. (FCM) effectively circumvented its suspension by HUD by creating two new mortgage companies and obtaining HUD approval for them to originate loans. FCM officers and employees were named as officers and employees of the two new companies while still working for FCM. The new entities also used FCM's office address.

FCM did not comply with HUD requirements in its origination of FHA-insured loans. In 18 of the 19 loans we reviewed, FCM staff did not obtain complete documentation, made improper income determinations, or did not ensure compliance with other HUD standards.

FCM did not implement the Quality Control (QC) Plan it submitted to HUD, and its QC processes did not comply with HUD regulations. The QC Plan did not address key elements including: (1) documenting corrective actions taken on QC results, (2) reporting significant discrepancies to HUD, (3) timely performance of QC reviews, and (4) QC review of rejected loans. FCM's actual QC performance was materially deficient.

We recommended that HUD suspend FCM's authority, and the two new mortgage companies authority, to originate and underwrite FHA loans. We also recommend that the Departmental Enforcement Center debar FCM's principals from further participation in HUD and other Federal programs and consider imposing civil money penalties.


Issue Date: May 4, 2004
Audit Memorandum No.: 2004-AT-1804
File Size: 143.4KB

Title: Audit Survey of Miami Dade Housing Agency, Miami-Dade County, Florida

We completed an audit survey of the Miami Dade Housing Agency's (Agency) administration of its housing development activities. We performed the review as part of an audit of the Department of Housing and Urban Development's (HUD) oversight of Public Housing Agency activities with related nonprofit entities. Our objective was to determine whether the Agency diverted or pledged resources subject to an Annual Contributions Contract (ACC) or other agreement or regulation to the benefit of other entities without specific HUD approval. We did not identify any deficiencies. Accordingly, we will not expand the survey into the audit phase.


Issue Date: March 19, 2004
Audit Report No.: 2004-AT-1003
File Size: 386.5KB

Title: Housing Authority of the City of Fort Lauderdale
Fort Lauderdale, Florida

The Authority violated its ACC with HUD by inappropriately pledging assets and advancing funds for some of its activities. Management inappropriately pledged assets of $452,000 in low-income housing (LIH) funds to assure the rehabilitation and purchase of two non-federal development activities. Management also inappropriately advanced $151,297 in LIH funds to support various programs. The Authority used $127,669 to purchase inventory materials or insurance for seven programs/activities, and $23,628 to support the activities of an affiliated nonprofit. On December 5, 2003, the Authority reimbursed all but $81,722. Furthermore, the Authority did not have a proper cost allocation plan to support the allocation of $11,404 to the Section 8 Program and $86,324 of indirect costs to the LIH and Section 8 funds. We believe these actions occurred because the Authority had not established adequate controls to monitor and ensure its transactions adhered to HUD requirements.


Issue Date: March 9, 2004
Audit Memorandum No.: 2004-AT-1803
File Size: 146.6KB

Title: Jacksonville Housing Authority
Jacksonville, Florida

We completed a review of the Jacksonville Housing Authority's (Authority) administration of its housing development activities. We performed the review as part of an audit of the Department of Housing and Urban Development's (HUD) oversight of Public Housing Agency activities with related nonprofit entities. Our objective was to determine whether the Authority diverted or pledged resources subject to an Annual Contributions Contract or other agreement or regulation to the benefit of other entities without specific HUD approval. We did not identify any deficiencies. Accordingly, our report did not contain any reportable conditions or recommendations for corrective action.


Issue Date: February 18, 2004
Audit Memorandum No.: 2004-AT-1801
File Size: 145.7KB

Title: Hialeah Housing Authority
Hialeah, Florida

We completed a review of the Hialeah Housing Authority's (Authority) administration of its housing development activities. We performed the review as part of an audit of the Department of Housing and Urban Development's (HUD) oversight of Public Housing Agency activities with related nonprofit entities. Our objective was to determine whether housing development activities involving the Authority and any related entities were carried out in accordance with Federal requirements. We determined the Authority's housing development activities were carried out in accordance with Federal requirements. Our report did not contain any reportable conditions or recommendations for corrective action.


Issue Date: January 31, 2003
Audit Memorandum No.: 2003-AT-1803
File Size: 501KB

Title: Fort Pierce Housing Authority Fort Pierce, Florida

The FPHA's system of accounting and management controls was weak. FPHA lacked controls to assure that it adhered to HUD and its own policies and procedures concerning cash disbursements, credit card and travel expenditures, procurement activities, purchases, and equipment inventory. As a result, HUD and the FPHA lacked assurance that its assets were properly safeguarded against waste, loss, and misuse. The FPHA did not adhere to HUD requirements designed to prevent conflicts of interest, assure the reasonableness of Section 8 rents, obtain third party verification of program participant's income, and calculate rent correctly. In addition, the FPHA used Section 8 reserve funds without Board of Commissioners approval as required by FPHA procedures. These weaknesses occurred because the FPHA had not established adequate or effective controls to administer the program. As a result, the FPHA could not ensure (1) limited resources of its Section 8 Program were used efficiently; (2) HUD subsidized reasonable Section 8 rents; and (3) program participants were treated fairly and equitable. The FPHA agreed with our findings and indicated they have or will take a number of corrective actions to address the findings.


Issue Date: January 16, 2003
Audit Memorandum No.: 2003-AT-1802
File Size: 410KB

Title: Housing Authority of the City Of Key
West Key West, Florida

The KWHA's procurement activities needed improvement. Management did not ensure that procurement activities complied with the Department of Housing and Urban Development (HUD) or local procurement policies and procedures. Our review found that: (1) cost estimates and cost/price analyses were not conducted, (2) the contract register was inaccurate, (3) records lacked sufficient documentation of procurement histories, and (4) contracts had conflict of interest relationships. These deficiencies occurred because there was no clear responsibility for the management, oversight, and review of procurement activities.

The KWHA needed to improve the administration of its Section 8 Program. Specifically, KWHA: (1) did not recognize conflict of interest situations, (2) did not establish reasonable contract rents and incorrectly calculated Housing Assistance Program (HAP) payments to landlords, and (3) did not conduct proper Housing Quality Standards (HQS) inspections. These weaknesses occurred because the KWHA staff lacked knowledge of HUD requirements and had not established adequate or effective controls to administer the program.

The KWHA agreed with our findings and indicated they have or will take a number of corrective actions to address the findings.


Issue Date: September 27, 2002
Audit Memorandum No.: 2002-AT-1809
File Size: 74KB

Title: Congressionally Requested Audit of the Outreach and Technical Assistance Grants and Intermediary Technical Assistance Grants awarded to the Florida Housing Coalition, Inc. Tallahassee, Florida

We completed an audit of the two Outreach and Technical Assistance Grants and four Intermediary Technical Assistance Grants awarded to Federal Housing Coalition, Inc. (Grantee). The overall objective of the review was to determine if the Grantee used Section 514 grant funds for only eligible activities as identified in the grant agreements and HUD requirements. We did not identify any ineligible lobbying activities. The Grantee used the OTAG and ITAG funds for only eligible activities and maintained accounting system records and documentation that complied with OMB Circulars A-122 and A-110. We found no material reportable conditions.


Issue Date: September 26, 2002
Audit Report No.: 2002-AT-1004
File Size: 79KB

Title: Ashley Crossings Apartment Homes -HUD Project No. 067-35331 Largo, Florida

At HUD's request, we conducted an audit of Ashley Crossings Apartment Homes. We reviewed project operations, construction activities, and procedures relating to the application, Firm Commitment, and Initial Closing on the project. Specifically, the audit objectives were to determine (1) what transpired up to and during the initial closing, (2) if the owner used project operating and trust funds in compliance with the Regulatory Agreement and HUD requirements specifically related to the distributions of earnings, and (3) whether improper construction activities occurred during the project's rehabilitation period. We found no irregularities related to the construction activities.

The owner improperly disbursed $312,439 in project operating and trust funds, while defaulting under the Regulatory Agreement and while providing HUD with inaccurate and incomplete information on monthly accounting reports. The ineligible disbursements consisted of $200,330 for unauthorized distributions, including $25,000 disbursed after the mortgage default, and $112,109 for ineligible management agent expenditures. The misuse of funds contributed to the mortgage default and HUD's recommendation to foreclose on the mortgage.

The owner improperly used $12,039 of tenant security deposits. As a result, project liabilities to tenants were not funded in a trust account as prescribed by HUD regulations. The owner also deposited tenant security deposits into the operating account initially and paid security deposit refunds from the operating account recently.

The owner failed to fully disclose all facts concerning the Ashley Crossings Project and mortgagor entity, and diverted mortgagor entity assets that could have been used for the project. HUD processed the loan application and approved the loan without full knowledge of all the relevant facts surrounding the acquisition of the property. Had HUD been aware of all the facts, the loan may not have been approved. As a result, the $12,989,900 HUD insured loan went into default, was assigned to HUD, and was recommended for foreclosure. Subsequent to the foreclosure recommendation, HUD decided to dispose of the mortgage in a note sale. The FHA Insurance Fund stands to suffer a substantial loss when the mortgage note is sold as a result of the assignment.

We attributed the conditions to the owner's failure to follow HUD requirements.

In response to the draft findings, the Atlanta Enforcement Center agreed to be responsible for implementing the draft report recommendations. The Atlanta Enforcement Center agreed to require repayment of ineligible distributions and ineligible management agent expenditures. The Center also agreed to pursue debarment action against the mortgagor entity and its individual principals.


Issue Date: October 30, 2001
Audit Memorandum No.: 2002-AT-1801
File Size: 138KB

Title: Hotline Complaint - West Palm Beach Housing Authority

The objective of our audit survey was to determine whether a hotline complaint alleging mismanagement of procurements resulting in inflated project costs, and the existence of a conflict of interest was valid. To accomplish our objective, we reviewed Department of Housing and Urban Development (HUD) and WPBHA policies and procedures, reviewed housing authority Comprehensive Grant Program (CGP) records, interviewed program officials at HUD and the WPBHA, and reviewed eight procurement or contract files including two contracts identified by the complainant.

Our review did not substantiate the allegations of procurement mismanagement and inflated costs, nor did we substantiate a conflict of interest. However, we found that WPBHA did not follow its written procurement policy and the policy in use was not the same procurement policy submitted to HUD after a 1997 monitoring review. We noted that the procurement policy did not require three price quotes for procurements up to $2000 and did not adequately address the use of purchase orders versus contracts. Contract files were also incomplete. HUD Office of Public Housing should review WPBHA's written procurement policy and determine if changes are warranted. WPBHA should comply with its written procurement policy and establish controls to ensure that contract/procurement files are complete.


Issue Date: September 27, 2001
Audit Memorandum No.: 2001-AT-1808
File Size: 453KB

Title: Autographed Book Give-Away for Inner City Youths, Inc., Orlando, FL, Nonprofit Participation in FHA Single Family Insurance Program

As part of a nationwide audit of the Federal Housing Administration�s (FHA) Single Family Insurance Program, we audited Autographed Book Give-Away for Inner-City Youths, Inc.�s (ABG) purchase of Real Estate Owned (REO) properties. Our objectives were to determine whether ABG was legitimate and independent (not under the influence, control, or direction of other parties) and passed on the benefits of discounts received on the purchase of HUD homes to low- and moderate-income homebuyers.

ABG did not properly control and manage its affordable housing program. ABG allowed venture partners to influence and control most of the properties purchased from HUD. The arrangement created a conflict of interest and defeated HUD�s objective of increasing opportunities for affordable homeownership to low and moderate-income persons. ABG sold homes to ineligible purchasers, sold homes at excessive prices, allowed properties to be sold at predatory loan rates, failed to maintain adequate accounting records, and needed to improve the quality of its renovation work. In addition to its failure to meet HUD�s program objectives, we question ABG�s charitable intent. The Executive Director used the non-profit to pay personal expenses of $97,351. Use of a nonprofit for personal benefit violates HUD�s eligibility criteria for participation in its programs. We recommend HUD require ABG to reimburse HUD $23,225 for the discounts it received on the three properties it sold to unqualified buyers, and pay down the mortgages for the 30 percent discounted properties sold in excess of 110 percent of net development cost.

We also recommend ABG assist homebuyers with exorbitant mortgage rates (over 17 percent) to obtain refinancing at reasonable prevailing rates, and correct or pay for rehabilitation deficiencies identified by our audit.


Issue Date: September 24, 2001
Audit Memorandum No.: 2001-AT-1806
File Size: 969KB

Title: the Rain Foundation, Titusville, FL, Nonprofit Participation in FHA Single Family Insurance Program

As part of a nationwide audit of the Federal Housing Administration�s (FHA) Single Family Insurance Program, we audited The Rain Foundation�s (Rain) purchase of Real Estate Owned (REO) properties. Our objectives were to determine whether Rain was legitimate and independent (not under the influence, control, or direction of other parties) and passed on the benefits of discounts received on the purchase of HUD homes to low and moderate-income homebuyers.

We concluded that Rain was not independent and did not pass on benefits of discounts it received from HUD. Rain allowed a consultant and venture partners to influence and control most of the properties purchased from HUD. The arrangement created a conflict of interest and defeated HUD�s objective of increasing opportunities for affordable homeownership to low and moderate-income persons. Rain and/or the venture partners received excessive profits from the resale of the properties. For the 6 properties we reviewed, Rain received discounts of $45,593 from HUD. However, it discounted them a total of only $7,750 below fair market value, while turning a profit for itself and its partners of $65,035. Also, Rain sold two properties to ineligible buyers, was unable to properly account for property repairs, and submitted inaccurate information to HUD during its re-certification process.

During our audit, HUD issued a 1-year removal action against Rain with an effective date of November 15, 2000. HUD found similar problems including use of joint venture agreements, conflicts of interest, and failure to pass on discounts to homeowners. We believe HUD�s action was appropriate. Since HUD has removed Rain from the program, we are making no further recommendations for corrective action.


Issue Date: December 8, 2000
Audit Report No.: 01-AT-251-1004
File Size: 923KB

Title: Palm Beach County Division of Human Services Supportive Housing Grant, West Palm Beach, Florida

As part of a nationwide audit of HUD�s Continuum of Care Program, we audited the 1996 Supportive Housing Grant awarded to Palm Beach County Division of Human Services (County).

We determined the County implemented activities consistent with its application, spent funds for eligible activities, and properly leveraged funding. However, the County needed to improve its administration of the program. Specifically, the audit disclosed:

  • A service provider had zoning problems and was unable to obtain site control within the 1-year period or timely provide transitional housing at the agreed location. As a result, the County did not provide the full level of housing units. Also, the delay may cause the County to be unable to spend the grant funds within the 3-year period. Furthermore, the County did not disclose the change in site location or obtain HUD approval for the change.

  • The County misclassified operating and supportive services costs totaling $285,717. As a result, the County incorrectly used about $32,103 of grant funds to pay for its share of the costs.

  • The County did not submit accurate program progress and financial information. Also, the County did not maintain adequate evidence of measurable results. As a result, the County and HUD lacked information to determine whether the grant activities were providing intended results.

  • The County did not follow required Federal procurement procedures in awarding contracts in excess of $1.1 million. County officials did not believe the Federal requirements were applicable. Therefore, the County entered into contracts with service providers to provide transitional housing and supportive services without competition or a cost/price analysis. As a result, the County and HUD have no assurance the costs for transitional housing and supportive services obtained under these contracts were reasonable and obtained at the best price.

The audit recommended that HUD instruct the County to improve its controls over the program and that HUD monitor any ongoing or future grants.


Issue Date: November 3, 2000
Audit Report No.: 01-AT-251-1002
File Size: 234KB

Title: Adopt-A-Family of the Palm Beaches, Inc.Supportive Housing Grant, West Palm Beach, Florida

As part of a nationwide audit of HUD�s Continuum of Care Program, we audited the 1996 Supportive Housing Grant awarded to Adopt-A-Family of the Palm Beaches, Inc (AAF). The audit objectives were to determine whether AAF:

  • Implemented activities consistent with its application;
  • Spent funds for eligible activities under Federal regulations and applicable cost principles;
  • Maintained evidence of measurable results;
  • Adequately leveraged funding; and
  • Spent funds timely.

We determined AAF implemented activities consistent with its applications, adequately leveraged funding, and timely spent grant funds for eligible activities. However, AAF needed to improve its administration of the program. Specifically, the audit disclosed AAF did not:

  • Follow Federal procurement requirements when awarding a professional counseling services contract. Instead, AAF contracted solely with a coalition partner. As a result, AAF and HUD had no assurance that the best service and price were obtained. Furthermore, AAF did not obtain adequate supporting documentation for counseling services expenditures. As a result, grant expenditures totaling $88,741 were unsupported.

  • Provide the agreed level of service for transitional housing. AAF chose to vacate and renovate available units during the grant period. During December 1999, only 15 of the agreed 32 units were available to house homeless families. AAF�s withdrawal of the units resulted in a significant reduction in the level of service that violated HUD requirements.

  • Provide accurate or complete information in its annual performance reports. AAF did not monitor one goal and underreported other goals. As a result, HUD lacked information to determine whether the grant activities were achieving intended results.

We recommend that you instruct AAF to improve its controls over the program and that you monitor any ongoing or future grants.

We presented our findings to AAF and HUD officials during the audit, and held an exit conference on September 20, 2000. AAF provided written comments to our findings on October 3, 2000. We considered the comments and suggestions in preparing our final report. We included excerpts of AAF�s comments in each finding and the complete comments as Appendix B.


Issue Date: October 20, 2000
Audit Report No.: 01-AT-202-1001
File Size: 521KB

Title: Housing Authority of the City of Miami Beach, Miami Beach, Florida

We conducted the audit in response to a request by the Department of Housing and Urban Development (HUD), Office of Public Housing. We reviewed selected aspects of the HACMB�s Section 8 and public housing operations. Our primary objectives were to determine if the HACMB complied with HUD and/or State of Florida requirements for: (1) Section 8 expenditures for inter-local projects with the City of Miami Beach (City); (2) Section 8 expenditures for construction of a single parent family housing and resource center; (3) Section 8 rent reasonableness and rent increases; and (4) procurement and general disbursements of public housing funds.

The audit disclosed violations of HUD requirements with regard to each audit objective and over $1 million in questioned costs and $9,267 ineligible costs. These conditions resulted from the HACMB�s mismanagement of its Section 8 and public housing programs and its financial affairs. Specifically, the HACMB:

  • Spent $795,178 of its Section 8 reserves for questionable activities provided through contracts with the City. The HACMB paid the City for police protection, recreation, and code enforcement. We questioned the reasonableness and necessity of the $795,178 paid for police protection, code enforcement and recreation. The costs were for public services the City should have provided from its local tax revenues.

  • Spent over $2 million in a failed effort to provide housing and social services. In 1995 HUD waived regulations to allow HACMB to refund bonds to refinance Rebecca Towers North on the condition that HACMB use a portion of the bond proceeds to construct a women and children housing and resource center. The HACMB spent over $2 million for site acquisition, site improvements, architect fees, City fees and various preliminary costs for the planned project. However, the project had been delayed for over 5 years and the HACMB had lost or was at risk of losing almost all of the $5.8 million originally committed to fund the project. Also, HACMB�s failure to complete the project deprived the City�s low-income community of the needed housing and social services. We questioned $209,570 paid to the City for fees and permits because the fees were excessive considering the joint venture project was not constructed.

  • Did not adhere to HUD requirements designed to assure the reasonableness of Section 8 rents. The HACMB also did not timely execute new leases for tenants who moved from one assisted unit to another, and did not pay tenants the amounts by which their utility allowances exceeded the family�s contribution for rent. As a result, there was inadequate assurance that HUD subsidized reasonable Section 8 rents and that tenants received the full benefit of their utility allowances. We noted some cases where the HACMB and owners provided false representations concerning rent reasonableness. These conditions caused HUD to pay $9,267 in excessive subsidy.

  • Had not implemented corrective actions recommended by past reviewers of its operations to comply with procurement requirements. For instance, subsequent to being put on notice concerning violations of procurement requirements, the HACMB acquired legal services and small purchases without adequate assurance that they obtained the most advantageous cost from the most qualified sources.

We recommend that you require HACMB to: (1) obtain additional supporting documentation or recover the $1,004,748 paid to the City, (2) reimburse HUD $9,267 for excessive housing assistance payments (HAP) to owners, (3) submit evidence that it has the financial capability and commitment to complete construction of the center within a reasonable time, and (4) establish the necessary controls to improve its operations. Although various reviews have identified noncompliance and systemic problems, the HACMB has shown a disregard for HUD requirements and associated management controls. If improvements are not made within a reasonable period of time, we recommend you consider declaring HACMB in substantial default, and identify other entities that can effectively carry out the programs. We also recommend that you restrict the use of all Section 8 administrative fee reserves until you determine and provide written notice to the HACMB that it has substantially resolved the systemic problems in its Section 8 Program, and the issues identified in the findings.

We provided copies of the draft report to the HACMB and HUD�s Florida State Office. We also discussed the draft report with HACMB officials at an exit conference on August 5, 2000, and with HUD officials on August 6, 2000. The HACMB provided its written response to the draft report on September 27, 2000. The HACMB disagreed with findings 1 and 2 but they basically agreed with findings 3 and 4. We considered HACMB and HUD responses in finalizing the report. The HACMB�s comments are summarized within each finding and included in their entirety in Appendix B.


Issue Date: May 24, 2000
Audit Report No.: 00-AT-202-1007
File Size: 520KB

Title: St. Petersburg Housing Authority, St. Petersburg, Florida

We have completed a review of the St. Petersburg Housing Authority (Authority). The purpose of our review was to evaluate the efficiency and effectiveness of the Authority�s operations. Specifically, we evaluated the Authority�s (1) procurement policies and practices, (2) administration of its Section 8 Program, (3) controls over and uses of funds received from a refinancing transaction, and (4) use of a master fund. Our report includes four findings requiring follow-up.


Issue Date: March 23, 2000
Audit Report No.: 00-AT-202-1004
File Size: 173KB

Title: Pinellas County Housing Authority, Clearwater, Florida

We have completed a review of the Pinellas County Housing Authority (PCHA). The purpose of our review was to evaluate the efficiency and effectiveness of PCHA operations. Specifically, we evaluated PCHA�s: (1) use of Section 23 leased housing funds remaining after program termination, (2) controls over property and Section 8 reserve funds donated to a nonprofit entity, (3) calculation of Section 8 administrative fees, and (4) compliance with procurement policies and procedures. Our report includes three findings requiring follow up action by the Office of Public Housing.


Issue Date: February 24, 1999
Audit Report No. 99-AT-206-1004
File Size: 2,474KB

Title: Housing Authority of the City of Sarasota Sarasota, Florida

We conducted an audit of the Housing Authority of the City of Sarasota, Florida. The primary objective of the review was to determine whether SHA was meeting its primary mission of providing decent, safe, and sanitary housing for its LIH tenants and Section 8 Program participants.

SHA did not maintain its conventional LIH in good repair and condition. Every unit we inspected failed. This occurred because the agency failed to: (1) perform routine and preventive maintenance, (2) spend Comprehensive Grant Program (CGP) funds as planned, and (3) adequately monitor or respond to the condition of the units. As a result, SHA was not providing decent, safe, and sanitary living conditions for many of its residents.

We recommend SHA develop a plan to improve its maintenance operations and bring all units in compliance with Housing Quality Standards (HQS). The plan should include complete inspection of all units, buildings, and grounds, and a means to generate work orders to correct HQS deficiencies. Also, the plan should include a written maintenance plan, preventive maintenance procedures, inspection procedures and schedules, and supervisory review procedures. We also recommend your staff review the plan and monitor SHA's actions to ensure the conditions are corrected.


Issue Date: September 3, 1998
Audit Report No. 98-AT-202-1008
File Size: 322KB

Title: Metropolitan Dade Housing Agency Public Housing Drug Elimination Program Miami, Florida

As part of a nationwide audit, we performed an audit of the Metro-Dade Housing Agency Public Housing Drug Elimination Grants. The Agency received $8,345,250 in PHDEP funds between 1994 and 1996. Our audit objectives were to determine whether the Agency (1) implemented its PHDEP awards for fiscal years 1994 through 1996 with satisfactory outcomes and benefits, (2) prepared and submitted timely and accurate semi-annual and final Financial and Performance Reports to HUD, (3) executed and monitored contracts with service providers, and (4) expended PHDEP funds for only eligible activities in accordance with applicable requirements for the fiscal years 1995 and 1996 grants.

The Agency lacked the necessary controls to properly monitor, evaluate, and report program results. Specifically, the Agency did not (1) establish a system to measure and monitor its grants to ensure that it met program objectives, (2) adequately report program results to HUD, (3) execute and monitor contracts with service providers, and (4) maintain proper managerial and accounting controls over its grants. As a consequence, the Agency expended $246,821 prior to executing its grants and $355,020 on ineligible and unsupported activities. The Agency used grant funds for such ineligible or unsupported activities as janitorial services, indirect costs, Christmas and Kwanzaa events, salary expenses, field trips, and other ineligible or unsupported activities. HUD should require the Agency to develop and implement the necessary management controls to establish goals, measure performance, and ensure proper administration of its grants. Further, HUD should require the Agency to reimburse its Drug Elimination Grant or the U.S. Treasury for ineligible costs and to resolve unsupported costs.


Issue Date: August 31, 1998
Audit Report No. 98-AT-202-1007
File Size: 312KB

Title: Housing Authority of the City of Sarasota Public Housing Drug Elimination Program Sarasota, Florida

We conducted an audit of the Housing Authority of the City of Sarasota's (SHA) Public Housing Drug Elimination Program (PHDEP) for fiscal years 1994 through 1996. The audit was part of a nationwide audit of the PHDEP. Our audit objectives were to determine whether the SHA (1) implemented a system for evaluating, monitoring, and reporting program outcomes/benefits; (2) prepared and submitted timely and accurate semi-annual performance reports to HUD; (3) established controls over its PHDEP planned expenditures, including assurances that only eligible costs were charged to grants; and (4) executed and monitored contracts with private providers.

The SHA lacked the necessary controls to properly monitor, evaluate, and report program results. Specifically, SHA did not: (1) establish a system to measure and monitor its grants to ensure that it met program objectives, (2) adequately report to HUD program results, (3) maintain proper control over its grants, and (4) execute and monitor contracts with private providers. The agency spent $377,976 without proper assurance the funds were of intended benefit to the community. Of the $377,976, $37,891 was ineligible because SHA charged its grants for costs incurred prior to grant award and after grant expiration. The SHA needs to substantially improve its control over the program, reimburse the program or HUD for ineligible costs, and resolve unsupported costs of $174,820. Also, HUD needs to recapture unused grant funds of $80,732.


Date Issued: May 19, 1998
Audit Report No. 98-AT-259-1006
File Size: 82KB

Title: Centro Campesino, Youthbuild Grants, Florida City, Florida

We have completed an audit of the Youthbuild Grants administered by Centro Campesino Farmworker Center (CCFC) of Florida City, Florida. Our report contains two findings requiring follow up action by the Office of Economic Development. We are providing a copy of this report to the auditee.


Date Issued: April 23, 1998
Audit Report No. 98-AT-206-1005
File Size: 219KB

Title: Tampa HA, Tampa, FL

The primary objective of the review initially was to identify contractors, vendors, employees, or other officials who may be involved in corruption, fraudulent activities, conflicts of interest or other illegal activities that detract from the integrity and effectiveness of THA's Low Income Housing (LIH) and Section 8 Programs. Based on survey work, we redirected the major thrust of our review to evaluate the efficiency and effectiveness of THA's administration of its LIH Program, as well as the impact of housing development corporations on THA operations. We limited our review of the Section 8 Program to procedures related to housing quality.

MAJOR RENOVATION CONTRACTS

Between 1994 and 1996, THA awarded contracts totaling $27 million for major renovation to resident-owned businesses (ROBs). THA awarded the contracts under special procedures aimed at benefiting residents, but THA abused the procedures. It awarded the contracts without competitive bidding and to unqualified resident businesses. The contracts exceeded estimates and program limitations, including a $1,000,000 lifetime Federal limitation on the amount of contracts residents can receive. THA also split bids on some contracts to avoid formal advertising. We believe prior THA management circumvented HUD procurement rules to select favored contractors. The practices resulted in THA incurring $1.9 million in ineligible costs, not achieving intended program results, duplicating costs, and favoritism.

HOUSING DEVELOPMENT CORPORATIONS

THA's relationship with housing development corporations was detrimental to its best interests. In the last 5 years, THA spent over $1.8 million for activities that primarily benefited the corporations, when THA's LIH Program had serious financial needs. Most of the benefits accrued to one corporation, Tampa Housing Development Corporation (THDC) managed by a former THA Executive Director (ED). The former ED used his position as Director of both entities to acquire assets and establish an income base for THDC, allowing THDC to separate from THA control. The separation may be contrary to the corporate documents and HUD regulations upon which THDC relied for authority.

HOUSING QUALITY

THA has not maintained its conventional housing in good repair and condition. As a result, THA is not providing decent, safe, and sanitary housing for many of its residents. Based on our review, including inspection of 46 units, housing deficiencies were numerous and serious. THA management did not perform needed oversight and direction to assure its staff was performing routine and preventive maintenance, and may have understaffed maintenance personnel at some projects.

RESIDENT PROGRAMS

We question whether THA's Resident Enterprise Assistance Program (REAP) is achieving its program goals. The program involves relatively small contracts for routine operations, such as lawn care, with the ultimate objective of resident economic independence. THA was not operating the program in accordance with various HUD and THA rules. Procurement requirements aimed at assuring competition and cost reasonableness were ignored, non-resident contractors were allowed to participate, and training to qualify resident businesses for participation was sometimes overlooked. As a result, program costs were excessive and concentrated in a few resident businesses, and most contractors were dependent on THA contracts rather than achieving the independence envisioned by the program. THA allowed one contractor to exceed the $1,000,000 lifetime Federal limitation on resident contracts.

THA controls over bank loans to residents through REAP were inadequate. THA was not properly accounting for loan guarantee funds, adequately monitoring the loans, and taking prudent collection actions on defaulted loans. The lack of controls may have contributed to loan defaults, hindered collection efforts on delinquent loans, and resulted in less funding for future participants.

PROPERTY MANAGEMENT

THA needs to significantly improve property management to verify tenant income and adjust rents, inspect housing units, track work orders for housing repairs, record amounts collected from and owed by tenants, and monitor resident employees. Inadequate procedures resulted in inaccurate tenant rents with some tenants possibly being ineligible for housing, housing not inspected annually, undue preferences to resident employees, and poorly maintained records. The deficiencies appeared to be caused by a lack of management controls, such as systematic monitoring and follow-up.

THA also allowed some resident employees to pay reduced rents, costing THA needed income. Based on HUD instructions, THA ordered project managers to discontinue the practice in 1996; however, it continued because of a lack of THA management controls.

MANAGEMENT ASSESSMENT PROGRAM

THA's 1997 Public Housing Management Assessment Program (PHMAP) certification, and in some instances prior certifications, contained inaccurate information which likely resulted in higher scores than justified. PHMAP is essentially a self-assessment housing authorities provide to HUD. Categories with erroneous information measured THA performance in collecting rent, completing non-emergency work orders, inspecting units and building systems, and managing resident programs.


Date Issued: March 26, 1998
Audit Report No. 98-AT-241-1003
File Size: 201KB

Title: City of Miami CDBG, Miami, FL

The City of Miami did not have adequate controls to ensure compliance with regulations or properly manage its CPD funds. As a result, the City spent $5,203,607 of Community Development Block Grant (CDBG) funds for grant administrative expenses without proper support. Also, the City spent $484,999 for ineligible grant administrative expenses. In addition, because the City did not efficiently and effectively manage its loan programs and did not safeguard its assets, approximately $9.9 million of its outstanding loan portfolio was in default. Further, the City allocated $4.75 million of HOME Investment Partnerships (HOME) funds for an affordable housing development that was not feasible.


Issue Date: March 13, 1998
Audit Report No. 98-AT-255-1002
File Size: 116KB

Title: City of Homestead, Homestead, FL

The City's inexperience in administering Federal grants, significant turnover in key management personnel, and the magnitude of the Hurricane Andrew disaster contributed to a number of problems. At January 1997, the City did not have an effective system to adequately track the expenditure of HOME funds. As a result, there were significant differences between HUD's record of draws and expenditures and the actual expenses incurred by the City.

The City's inexperience in administering Federal grants resulted in the inappropriate accumulation of income derived by the City from some of its HOME activities. The City did not deposit over $500,000 in program income into a separate local HOME account and did not use this income before making additional draws of HOME funds from its US Treasury HOME account. Both were violations of HOME regulations.

The City acquired over 150 lots using, in part or in total, over $3 million in HOME funds. Although HOME funds can be used to acquire vacant lots, the acquisition of vacant lots must be part of an otherwise eligible HOME project. The acquisition cost of these lots exceeded what the City had anticipated, and the City now has insufficient funds to complete HOME eligible projects on 37 of these 150 vacant lots. Based on the average amount of HOME funds expended on the acquisition of vacant lots, the total HOME dollars expended improperly on these remaining 37 lots is over $1.4 million.

Our review identified about $56,000 in ineligible costs which were due primarily to the City's inability to effectively track progress payments made to contractors. On at least four occasions, the City overpaid contractors for work related to HOME-funded projects. The contractors overdrew the contract amount, and the City did not detect the subsequent overpayments. Additionally, the City improperly used $5,000 in HOME funds for the acquisition of commercial property, and the City inappropriately paid about $9,000 in legal fees associated with a rehabilitation project that was not eligible for HOME funding.


Date Issued: November 18, 1997
Audit Related Memorandum No. 98-AT-211-1803
File Size: 23KB

Title: CMI, Miami, FL

The project management needed corrective actions. For example, CMI improperly used project rental space. This violated the Regulatory Agreement because CMI failed to obtain HUD's approval. We also noted that CMI was overpaid $6,555, paid its management fees prior to rent collections, and maintained inadequate fidelity bond coverage. The owner needs to take action to prevent further violations of the Regulatory Agreement.


Issue Date: October 22, 1997
Audit Related Memorandum No. 98-AT-211-1801
File Size: 216KB

Title: Bethel Community Heights Apts., St. Petersburg, FL

In conjunction with Operation Safe Home and a recommendation from the Jacksonville Area Office (JAO), we conducted a limited review of Bethel Community Heights Apartments (BCH) project operations. The review was designed primarily to identify diversion of project funds or serious program abuse.

The project is an 84 unit multifamily complex located at 731 15th Street South, St. Petersburg, Florida. Bethel Community Heights, Inc. a State of Florida not-for-profit corporation, owns BCH. Searchwell Thorne & Associates is the management agent (MA) for the project. BCH's mortgage is insured by the Department of Housing and Urban Development (HUD) under Section 221 (d) (3) of the National Housing Act. The project receives Section 8 rental assistance for all units under the terms of an Annual Contributions Contract and was at 92 percent occupancy at the time of our review. BCH also received a flexible subsidy loan from HUD in 1992 for $410,654. The flexible subsidy contract was amended in 1994 and increased to $1,351,339 to correct the physical and financial deficiencies of the project.


Issue Date: August 12, 1997
Audit Case Number 97-AT-211-1004
File Size: 53KB

Title: Cooper-Holt, Jacksonville Beach, FL

We tested books and records of The Beaches Hamlet LTD, d/b/a Cooper-Holt Manor, to determine whether selected project activities and expenditures complied with HUD requirements. The managing general partner mismanaged project operations by disregarding Regulatory Agreement and other U.S. Department of Housing and Urban Development (HUD) requirements. We identified ineligible and unsupported expenditures of $220,318 and $37,824, respectively.


Issue Date: September 4, 1996
Audit Related Memorandum 96-AT-203-1825
File Size: 85KB

Title: HA of the City of Dania, Dania, FL

Four relatives or extended family members of a former acting executive director (acting ED) misrepresented their total housing expenses and/or preference status to obtain Section 8 assistance. The acting ED should have at least suspected the abuses. Section 8 assistance totaling $28,424 through March 1996 was paid on their behalf rather than for families on the waiting list longer. We recommend termination of Section 8 assistance for the four families, and that consideration be given to having them reimburse the Section 8 program for all assistance received. We further recommend a Limited Denial of Participation (LDP) for the acting ED and the four family members.

In October 1995, the DHA Board entered into a management contract without adequately establishing whether its terms and conditions were in the best interests of DHA. In general, the 1-year contract provided for the contractor to manage DHA's day to day operations for $130,000 annually, payable pro-rata monthly. The DHA should have conducted procurement to promote open competition, but did not do so. There were other deficiencies including inadequate history of the procurement, and inappropriate contract terms and conditions. Also, an appearance of favoritism existed in the procurement of two contracts; and accounting services were not periodically re-bid. We recommend DHA terminate the management contract, and take needed measures to safeguard its and HUD's interests when procuring goods and services.


Issue Date: May 13, 1996
Audit Report Number 96-AT-221-1004
File Size: 76KB

Title: Waters Mortgage Corp., Plantation, FL

The report identifies significant loan origination deficiencies which warrant action by the Mortgagee Review Board. Our test of 107 loans, all to the same borrower, showed that Waters Mortgage did not originate the 203(k) loans in accordance with HUD requirements.


Issue Date: December 14, 1995
Audit-Related Memorandum 96-AT-201-1805
File Size: 19KB

Title: Crestview HA, Crestview, FL

Based on the results of the limited survey, we will not do a detailed review of CHA. However, we confirmed conflict-of-interest involvement at CHA with Section 8 properties, which your Division and CHA should resolve. In addition, we noted the following questionable practices: - Insurance Proceeds Were Handled Laxly, and - Tenant Association (CHATA) Had Inadequate Records.


Issue Date: October 18, 1995
Audit Related Memorandum No. 96-AT-201-1802
File Size: 34KB

Title: Hialeah HA, Hialeah, FL

The executive director (ED) charged the authority $62,882 for ineligible health and insurance premiums for his divorced spouse, ineligible and unsupported travel costs, and excessive compensatory time. Furthermore, the ED did not follow required payment and procurement policies, violated the conflict of interest provisions for Section 8 contracts with the mayor and a business partner, improperly withdrew $200,000 from the Section 8 reserve account, did not properly control staff resources, and did not ensure compliance with Section 8 tenant preferences, salary comparability and cost allocation requirements, and pooling of funds requirements.

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